Community Healthcare Trust(CHCT) - 2019 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION Financial Statements (Unaudited) This section presents the unaudited condensed consolidated financial statements for Community Healthcare Trust Incorporated as of June 30, 2019 Condensed Consolidated Balance Sheets Total assets grew to $490.5 million from $426.6 million at year-end 2018, driven by real estate and increased debt Condensed Consolidated Balance Sheet Highlights (in thousands) | Metric | June 30, 2019 | December 31, 2018 | | :--- | :--- | :--- | | Total real estate properties, net | $445,738 | $389,632 | | Total assets | $490,500 | $426,570 | | Debt, net | $198,176 | $147,766 | | Total liabilities | $211,380 | $154,911 | | Total stockholders' equity | $279,120 | $271,659 | Condensed Consolidated Statements of Income Revenues increased due to acquisitions, but higher operating and interest expenses led to a decrease in net income for both periods Income Statement Summary (in thousands) | Period | Metric | 2019 | 2018 | | :--- | :--- | :--- | :--- | | Three Months Ended June 30 | Total Revenues | $14,316 | $12,402 | | | Net Income | $2,066 | $2,417 | | | Diluted EPS | $0.09 | $0.12 | | Six Months Ended June 30 | Total Revenues | $27,757 | $23,831 | | | Net Income | $3,516 | $4,289 | | | Diluted EPS | $0.16 | $0.22 | Condensed Consolidated Statements of Comprehensive (Loss) Income The company reported a comprehensive loss for Q2 and H1 2019, primarily due to unrealized losses on cash flow hedges - For the six months ended June 30, 2019, the company recorded a net income of $3.5 million but a comprehensive loss of $1.9 million. The difference was driven by a $5.4 million loss in other comprehensive income, mainly from the change in fair value of cash flow hedges[13] Condensed Consolidated Statements of Stockholders' Equity Stockholders' equity increased to $279.1 million from stock issuance and net income, offset by dividends and comprehensive loss - Key changes in stockholders' equity for the six months ended June 30, 2019 include net proceeds from common stock issuance of $23.0 million, net income of $3.5 million, and dividends paid of $15.4 million[15] Condensed Consolidated Statements of Cash Flows Operating cash increased to $14.4 million, with $64.8 million used for acquisitions, funded by $57.3 million from financing Cash Flow Summary for Six Months Ended June 30 (in thousands) | Cash Flow Activity | 2019 | 2018 | | :--- | :--- | :--- | | Net cash provided by operating activities | $14,383 | $13,028 | | Net cash used in investing activities | ($64,783) | ($30,653) | | Net cash provided by financing activities | $57,273 | $17,279 | - The significant increase in cash used for investing activities in H1 2019 ($64.8M vs $30.7M in H1 2018) was primarily due to a higher volume of real estate acquisitions ($63.4M vs $20.1M)[16] Notes to Condensed Consolidated Financial Statements Notes detail the company's healthcare REIT business, portfolio, acquisitions, credit, derivatives, and subsequent events - As of June 30, 2019, the Company's portfolio consisted of 108 real estate properties in 30 states, with an investment value of approximately $511.6 million[19][37] - During the first six months of 2019, the Company acquired five real estate properties for an aggregate purchase price of approximately $64.6 million[44][45] - On March 29, 2019, the Company amended its credit facility, adding a new $75.0 million term loan (A-3 Term Loan) maturing in 2026[50] - Subsequent to quarter-end, the Company acquired three additional properties for approximately $52.6 million and declared a quarterly dividend of $0.4125 per share[89][90] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses financial performance, acquisition pipeline, liquidity, capital resources, and FFO reconciliation Trends and Matters Impacting Operating Results Operating results are driven by acquisitions, with $64.6 million in H1 2019 and a $102.8 million pipeline, maintaining 90.1% occupancy - The company has a significant acquisition pipeline with nine properties under definitive purchase agreements for an aggregate expected price of approximately $102.8 million ($15.8 million expected in Q3 2019 and $87.0 million through 2020)[101][102] - As of June 30, 2019, the real estate portfolio was approximately 90.1% leased[104] Results of Operations Revenue increased due to acquisitions, but higher expenses led to decreased net income, with FFO reconciliation provided FFO Reconciliation (in thousands) | Period | Metric | 2019 | 2018 | | :--- | :--- | :--- | :--- | | Three Months Ended June 30 | Net Income | $2,066 | $2,417 | | | Funds from Operations | $7,406 | $7,041 | | | FFO per Share-Diluted | $0.40 | $0.40 | | Six Months Ended June 30 | Total Revenues | $27,757 | $23,831 | | | Net Income | $3,516 | $4,289 | | | Funds from Operations | $14,138 | $13,824 | | | FFO per Share-Diluted | $0.76 | $0.78 | - The increase in revenues for Q2 2019 ($1.9 million or 15.4%) and H1 2019 ($3.9 million or 16.5%) compared to the same periods in 2018 was mainly due to acquisitions of real estate[117][125] - Interest expense increased significantly by 43.3% in Q2 and 51.6% in H1 2019 year-over-year, primarily due to additional Term Loan borrowings to fund acquisitions[122][130] Liquidity and Capital Resources Liquidity from operations, credit, and equity issuances supports acquisitions and dividends, with $131.0 million borrowing capacity - As of June 30, 2019, the company had approximately $131.0 million of borrowing capacity remaining under its Revolving Credit Facility[140] - During the first six months of 2019, the company issued 641,053 shares through its ATM Program, receiving proceeds of approximately $23.2 million[148] - The company's debt to total capitalization ratio was approximately 36.5% at June 30, 2019[140] Quantitative and Qualitative Disclosures about Market Risk The company manages interest rate risk on borrowings using derivative instruments like interest rate swaps, not for speculation - The company's main market risk is interest rate risk associated with its borrowings[157] - To manage interest rate risk, the company uses derivative instruments, such as interest rate swaps, to hedge its exposure[157] Controls and Procedures Management concluded disclosure controls were effective, with no material changes in internal control over financial reporting - Management concluded that the company's disclosure controls and procedures were effective as of the end of the period covered by the report[158] - No changes in internal control over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, internal controls[159] PART II. OTHER INFORMATION Legal Proceedings The company is not aware of any material pending or threatened litigation - The Company is not aware of any pending or threatened litigation that would have a material adverse effect on its financial condition or results[160] Risk Factors The company will become a large accelerated filer, increasing compliance requirements and costs, including auditor attestation - The company will no longer qualify as an emerging growth company after December 31, 2019, and will be deemed a large accelerated filer[161][163] - As a large accelerated filer, the company will face increased compliance requirements, including an auditor attestation on the effectiveness of internal control over financial reporting, which is expected to increase compliance costs[163][165][167] Unregistered Sales of Equity Securities and Use of Proceeds No unregistered sales of equity securities occurred during the period - None[172] Defaults Upon Senior Securities No defaults upon senior securities occurred during the period - None[173] Mine Safety Disclosures This item is not applicable to the company - None[174] Other Information No other information to report for the period - None[175] Exhibits This section lists the exhibits filed with the Form 10-Q, including certifications and XBRL data files - The exhibits required by Item 601 of Regulation S-X are filed with the report and listed in the Exhibit Index[176]